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The Last Word Comment


Helping or ‘helping’ debtors in Croatia


A newly-introduced personal bankruptcy law is aiming to help Croatian debtors to get back on their feet after the recession


Zoran Bohacek Managing director, The Croatian Banking Association zoran.bohacek@inet.hr


Croatia is only now, after seven years of lingering recession, showing signs of economic recovery. One consequence has been a significant increase in paying bills and loans by instalments. During the recession, ever more utilities –


particularly telecoms – bills and even taxes were paid late, if at all. This resulted in blocking accounts for consumers when collection efforts were unsuccessful, making it even more difficult for customers to get out of financial trouble. Most of them were not irresponsible


consumers, but, with loss of jobs and reduced salaries for some, they simply did not have sufficient revenues to continue spending the same way as before. One of the remedies is the newly-


introduced personal bankruptcy law. Such a law did not previously exist in Croatia – where a continental legal environment exists – meaning that, if the entire debt was not covered even after the sale of the debtor’s property, the debtor still owed the balance. For someone without assets or a job, the chances were very bleak. After many years of annoucements and


almost two years of active discussions in a working group brought together by the Ministry of Justice – where banks were represented – the law took final shape. After all the preparations have been completed, it should help those with no alternatives. The procedure will, firstly, try to find a


solution via a pre-bankruptcy procedure, and if that does not succeed, a judge will declare the consumer bankrupt and dispose of their assets, while leaving them a small part of their income to live on.


50 www.CCRmagazine.co.uk In the next five-year period, the remainder


of their income and proceeds of forced sale, if any, will repay the creditors proportionally. If a consumer is behaving according to the rules, after that period they will be cleared of all remaining debts and have a chance to start again and regain their financial independence. Another debt-relief project was completed


at the end of July. At the initiative of the Ministry of Social Policy and Youth, a voluntary, one-off agreement was signed with numerous creditors from both the private and public sectors. The rules were that a ‘private’ debt – mainly owed to banks and telecoms creditors – totalling less than €1,315 and ‘public’ debt – taxes, electricity, and television – of up to €3,300 would be written off if a debtor fulfilled strict criteria. In the first group, there were recipients of


If a consumer is behaving according to the rules, after five years they will be cleared of all remaining debts and have a chance to start again and regain their financial independence


welfare payments, who had been previously checked to ensure that they qualified, and, in the second group, were all consumers who did not have other property, cars or bank deposits and had a below-minimum income per capita. A total number of 60,000 debtors was


hoped for at the beginning, but less than 13,000 debts were written off. From the first group, most eligible consumers profited from the offer, but most of the others obviously did have other assets and knew they would not qualify. The entire project was a bit controversial


because it sent the wrong message to those who were struggling but paying. However, as a social measure it was accepted by the creditors, although alternative solutions were mentioned, partially modelled on UK or Irish regulations. CCR


October 2015


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